April price rises: how to keep costs down as bills go up
From energy to council tax, prices are going up in April. With inflation still above 10%, this year's increases look set to be especially painful for already squeezed households.
Here, we round up some of the biggest hikes coming next month and explain what you can do to keep costs down.
Personal tax
The personal allowance – the amount you can earn before you start paying income tax – will be frozen (at £12,570) across the UK until April 2028. The same goes for the basic-rate tax band in England, Wales and Northern Ireland, meaning you’ll continue to pay 20% on income between £12,571 and £50,270, and the higher rate of 40% on income above that. In Scotland, the starter, basic and intermediate-rate tax bands will also remain unchanged.
While this may not look like a tax rise, if your salary increases while thresholds remain the same you’ll pay more tax on your income – particularly if you end up in a higher tax band as a result.
The threshold at which you start paying additional-rate tax (known as ‘top rate’ in Scotland) will reduce from £150,000 to £125,140 from April. It’s estimated that around 250,000 taxpayers will be pushed into this top band as a result, meaning they will pay tax at 45% on any income above the new limit (47% in Scotland). From April, Scottish higher-rate taxpayers (those earning between £43,663 and £125,140) will pay tax at 42%, up from 41%.
More people will also end up paying capital gains tax (CGT) and dividend tax as the tax-free allowances are about to be slashed. The dividend allowance will be halved from £2,000 to £1,000 from April, and then to £500 in April 2024.
How to pay less
Make the most of your £20,000 Isa allowance, as any investments held inside an Isa can grow completely tax-free. You have the option to move existing investments into an Isa by selling them and then buying them back in an Isa – a process that’s known as Bed and Isa.
Bear in mind that the sale could trigger a CGT bill if the profit takes you above your tax-free allowance, so consider selling before the allowance is slashed from next month. You can also offset losses from the same or a previous tax year to reduce your bill.
If you have a legal partner who hasn’t used up their CGT allowance or is in a lower tax band, you can reduce a CGT bill by transferring assets to them before selling.
Council tax
From April 2023, local authorities in England will be allowed to raise council tax by up to 5%, including the social care precept (if your council qualifies) and without the need for a local referendum. Previously, they could only raise it to a maximum of 2.99%.
The majority of eligible councils are expected to push ahead with the 5% rise, but those with particularly stretched finances have been given government permission to raise rates higher than the new limit. For example, Croydon is raising bills by 15%.
How much you pay depends on where you live and which council tax band your property falls into. A 5% increase could see average annual band D council tax rising by nearly £100 (from £1,966 to £2,064).There are no caps on the amount local authorities can increase council tax by in Scotland or Wales. The same goes for domestic rates (equivalent to council tax) in Northern Ireland.
How to pay less
You may qualify for a discount on your council tax bill. For example, you can get 25% off if you live alone or with others who are ‘disregarded’ for council tax purposes, such as students or someone with severe mental impairment. You can also apply for a band reduction if your home is adapted for a disabled person.
Council tax bands are based on the value of your home in 1991 (or 2003 in Wales). If you think the original valuation was wrong, or if changes have been made to the property’s use or size that may alter the band it should sit in, you can appeal for it to be reassessed. If it’s put in a lower band, your bill will be reduced and you could also receive backdated payments.
- Find out more: how to get a council tax reduction
Energy
The Energy Price Guarantee, which limits the average annual household bill to £2,500, was due to rise to £3,000 in April 2023, but this increase will now be postponed until July.
However, it's worth noting that the government's Energy Bill Support Scheme, which has seen most households receive an additional £67 a month towards their energy bills, will still finish at the end of March. This means that, in real terms, most households will still find April's monthly bill more expensive than they have been recently. Only the most vulnerable households, such as those on benefits or pensioners, will now receive government financial support from April.
And remember, your bill will still depend on how much energy you use, so could be higher or lower than the Energy Price Guarantee.
How to pay less
You’re unlikely to find a supplier offering a fixed tariff worth switching to. This means that focusing on reducing your energy usage is the most effective way to trim your bills.
Here are a few simple changes you can make to reduce energy costs:
- Find out more: how the Energy Price Guarantee works
Broadband and mobile
Broadband providers typically raise prices each year in line with inflation, plus an additional 3-3.9%, making hikes this April particularly steep. As many providers allow for price increases in their T&Cs, customers within their minimum contract period have little choice but to accept them.
Among these providers is BT Group, which includes BT, EE and Plusnet. It has confirmed that prices will increase by more than 14% from 31 March, adding an extra £66 to the average annual bill.
Virgin will increase prices ‘on average’ by 13.8%, from either 1 April or 1 May, depending on the package. Unlike other providers, its contracts don’t currently factor in rises, so customers are able to switch without paying exit fees, although that will end in April 2024.
Mobile phone providers are also putting up their tariffs. Customers with O2 and Virgin Mobile face the biggest rises, as high as 17.3%. Meanwhile, EE, Three and Vodafone are increasing prices by 14.4% (Consumer Prices Index inflation rate published in January, plus 3.9%).
The only mobile provider not raising prices – other than those exclusively offering rolling Sim-only contracts – is Sky Mobile.
How to pay less
If you’re out of contract, you’re free to shop around to find a better deal. If you’re happy with your current provider, but want to get a better price or faster broadband speed, it pays to haggle.
If you’re mid-contract, you’ll need to pay an exit fee to leave, or you could ask your provider what support it can offer. But remember to avoid taking out a 24 or 36-month contract, however attractive the original cost might be.
- Find out more: how to avoid inflation on a mobile contract
